U.S. District Judge Robert J. Shelby ruled on Tuesday that the Commodity Exchange Act (CEA) does not protect the company Kalshi from Utah state laws against gambling, granting the state's motion for summary judgment and denying the exchange's motion for a preliminary injunction. "The court concludes the federal law upon which Kalshi relies does not deprive the state of Utah of its ability to enforce its anti-gambling laws," Shelby wrote.
The reasoning relied more on ambiguity than on a finding that event contracts are gambling. Shelby ruled that the jurisdictional provisions of the Commodity Exchange Act (CEA) are susceptible to multiple plausible readings, and that courts generally do not support federal preemption precisely in such a situation. "Given the CEA's structure and the history of state regulation of gambling, the court cannot conclude that the CEA is so comprehensive that it leaves no room for Utah to supplement it," he wrote in the decision, details of which were first published by Bloomberg Law.
He also rejected Kalshi's primary legal argument. The exchange had argued that wording changes made by the Dodd-Frank Act established federal preemption over derivatives trading; Shelby called this an "implausible" reading of congressional intent, noting that Kalshi itself acknowledges gambling is an area "traditionally regulated by the states."
Utah is an unusually hostile venue for such an argument. The state's constitution completely prohibits gambling, and offering online betting there is classified as a third-degree felony. A new state law adding referendum outcome betting to the legislative definition of gambling prompted Kalshi to file suit in February, after Governor Spencer Cox publicly criticized prediction markets and the company began to fear Utah intended to pursue criminal enforcement.
"You cannot rename illegal gambling as a federal commodity, and today a federal judge agreed with us," Utah Attorney General Derek Brown said, adding, "Kalshi bet that clever branding would defeat Utah law. Kalshi lost, and Utah won." Cox was even more blunt, writing after the ruling that "prediction markets are gambling, period," and that they "cause immense harm to countless American families."
Kalshi spokesperson Jackie McGauvic said the company disagrees with the decision and that it is not final in Utah. For now, event contracts remain available to Utah users, and no enforcement action has been taken.
The New York Attorney General's office cited the Shelby decision within a day, using it as supplemental legal authority to oppose a motion by the Commodity Futures Trading Commission (CFTC) for a preliminary injunction against the state after it sued Kalshi last week as an unlicensed gambling operator.
Gaming attorney Daniel Wallach, who flagged the citation in the New York case, said an expected appeal to the Tenth Circuit Court of Appeals will mean prediction-market-related cases are active in seven of the 13 federal appellate circuits—the First, Second, Third, Fourth, Sixth, Ninth, and Tenth—with the Seventh and Eighth circuits expected to follow. That kind of broad, multi-circuit consideration is what typically leads to splits that prompt Supreme Court review.
On July 20, a Washington state court issued an injunction, rejecting the same federal preemption argument and finding Kalshi "operates an online betting platform," and more than 40 states have contested the Commodity Futures Trading Commission's (CFTC) claim to exclusive jurisdiction. Kalshi's most notable victories remain an April Third Circuit ruling protecting it in New Jersey and a Minnesota federal judge's order last week blocking that state's felony gambling ban.
